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Some service startups see advantage from higher wages

Employers and economists see benefit in higher wages, which can improve retention and productivity

The past four decades have not been kind to the U.S. worker. After a post-war period of sustained compensation growth, wages began to stagnate in the 1970s, despite the continued growth of worker productivity. Since then, U.S. wealth has become more concentrated at the top of the economic spectrum.

A handful of so-called “high road” employers have argued that it doesn’t have to be this way. They argue their businesses do better when they offer unusually high wages and salaries. Dan Teran, CEO of the tech company Managed by Q, which provides office maintenance services on demand, said Thursday that even the startup economy could see long-term economic gains from such practices.

Investing more in workers means they stay at the company longer and become more productive, Teran said at a Labor Department panel titled “Shared Prosperity in the Future of Work." Choosing not to invest can sometimes mean struggling to retain a full staff.

“One of the biggest challenges is attracting and maintaining talent,” Teran said. “When we talk to our peers, people at companies like Uber have their brightest minds working on solving supply problems."

In contrast, he said that his company had managed to drastically reduce turnover by offering relatively high wages, a flexible paid leave policy, and opportunities for advancement within the company. Employees who stay longer in their jobs can become more experienced and, therefore, more productive; the company then also conserves resources that would otherwise be dedicated to recruiting and training new employees.

“Our retention numbers, monthly, typically range from 97 to 99 percent of employees retained, because we’ve created a place where they can grow and develop,” said Teran. “And when they need time off, they get time off."

Many companies with atypically generous compensation policies also see a public relations advantage. The Seattle credit card processing firm Gravity Payments won fawning press coverage in April when it announced that even its lowest paid workers would soon earn at least $70,000 per year. Earlier this month, Bloomberg Businessweek suggested that the real reason for the Gravity wage increases may have been less than magnanimous: that it was a tactic to undercut the CEO’s brother amidst a legal battle over company revenue.

The non-profit B Lab seeks to encourage more generous labor practices and other “high road” management strategies by offering a certification to any company that meets its standards. The non-profit's website says that this certification, by providing independent verification of a company's business practices, attracts positive news coverage, as well as support from investors and job applicants.

B Lab co-founder Andrew Kassoy, who also sat on the Labor Department panel, said that having a reputation as an ethical employer is important to businesses hoping to reach young consumers and investors. “Sometimes people talk about doing well and doing good,” said Kassoy. "I think that for a lot of these companies the business case is to do well because you do good." 

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